BMW calls time on endless customisation as electric costs bite
BMW plans to radically shrink the choice buyers have on everything from a car’s colour to its wheel rims, as the shift to electric vehicles forces the German group to cut costs and complexity.
The carmaker has long prided itself on offering an extensive range of design customisations, engine variants and in-car features, including for its Mini brand, to entice customers.
However, that promise is becoming increasingly onerous as it produces more electric cars but not yet in numbers to achieve the economies of scale it has with combustion engine models.
The Munich-based group, which is targeting a profit margin of between 8 and 10 per cent even as it sells more electric models, needed those factories that made both combustion engine and battery-powered cars to be “highly efficient” to reach that goal, said chief financial officer Nicolas Peter.
“We will especially reduce the number of available combinations, because certain combinations make no sense at all, and are never chosen,” Peter said in Frankfurt on Tuesday.
The new strategy from BMW contrasts with those of mass-market manufacturers, which typically provide a dizzying array of options to generate extra revenue and fatten razor-thin margins.
At the other end of the spectrum, Ferrari and Lamborghini also make huge profits by persuading customers to order bespoke cosmetic alterations to seats or wheels.
For BMW, “there’s a potential to go from offering 10 different [rims], which we might have done earlier, to five,” said Peter, gesturing to BMW’s new electric iX model, “without losing a single unit [sale]”.
The small number of customers who choose a particularly niche option would “probably would have bought something else”, if that choice was not available, Peter said, adding that the group would use data from online sales portals when deciding which choices to eliminate.
By contrast, Sweden’s Volvo Cars offers customers only a single, four-cylinder engine option, and has simplified its range to cut costs.
The number of modifications offered by BMW would land somewhere in the middle of the extremes, Peter said, emphasising that “there’s enough room to move to the middle, to become more efficient and save money”, while still offering enough customisation to justify high prices.
The move by BMW comes as the growing importance of in-car software meant digital customisations would play a larger role in differentiating premium cars from each other, Peter added.
Although BMW’s longstanding competitor Mercedes-Benz has also begun to reduce the complexity of its line-up, by, for example, phasing out models with manual transmission, it has not yet announced a detailed change in policy.
Once an electric auto pioneer, with its flagship i3, BMW has fallen behind its rivals in the race to launch battery models, and has expressed scepticism about the projected speed of the transition away from the internal combustion engine.
Nonetheless, the company, which expects to sell more than 100,000 fully electric vehicles this year, would more than double that number next year, Peter said, despite persistent semiconductor supply shortages.